Fiduciary 401(k) Breach Claims Against Milliman Will Proceed

A federal judge in Washington state on December 13 denied a motion from Milliman Inc. to dismiss breach of fiduciary duty claims brought by a 401(k) retirement plan participant under the Employee Retirement Income Security Act.

The court order allows the plaintiff’s breach of fiduciary duty claims to proceed, including allegations of mismanagement of investments in its employer-provided 401(k) plan. Seattle-based actuarial and consulting firm Milliman is now faced with ERISA counts for breaches of duties of loyalty and of prudence and failure to monitor its workplace 401(k).

In June, U.S. District Court Judge for the Western District of Washington Thomas Zilly had dismissed portions of the complaint, but the plaintiff was allowed to submit an amended version, and this one allows all three complaints to proceed.

Although Milliman argued the plaintiff’s amended complaint failed to state a claim, Zilly ruled that the legal standard to state a claim for breach of fiduciary duty was met by the plaintiff’s amended complaint. These included that the plaintiff must allege facts plausibly showing that defendants were fiduciaries, that defendants breached their fiduciary duties and that their breach caused loss to the ERISA-covered plan.

“Having viewed plaintiff’s allegations in their totality, the court is persuaded that plaintiff has pleaded a ‘plausible’ claim for breach of fiduciary duty,” Zilly stated.

Milliman argued, unsuccessfully, that “in her second effort, plaintiff has again failed to establish that various funds or indices are appropriate comparators. … In their present attack, defendants do not identify necessary details that plaintiff has omitted or neglected to include, but rather (i) dispute plaintiff’s characterization of the investment options at issue, and (ii) disagree with inferences plaintiff has drawn from the statistics that she has proffered,” the court order stated.

Zilly also dismissed the defendant’s argument to throw out the failure to monitor claim.

“Defendants contend that, because a failure to monitor claim is derivative of a breach of fiduciary duty claim, which defendants argue has not been adequately pleaded, plaintiff’s failure to monitor claim also fails,” he stated. “In light, however, of the court’s ruling concerning plaintiff’s breach of fiduciary duty claim, defendants’ motion to dismiss plaintiff’s failure to monitor claim likewise lacks merit.”

The initial complaint proposed a class action lawsuit. The plaintiff alleged Milliman failed to prudently monitor the plan’s investments.

The complaint alleged Milliman mismanaged the retirement plan’s investments, causing harm to workers contributing to their 401(k). The complaint accused plan fiduciaries of failure to remove three of the plan’s “poorly performing investment options,” the plaintiff stated.

According to the original complaint, when the investment committee decided to add a suite of target-risk funds to the plan’s investment menu in 2013, the funds had only been launched two months prior, had no track record and were untested.

The plan had approximately $1.7 billion in assets under management, according to the original complaint.

A Milliman spokesperson declined to comment.